A stock option allows (but does not obligate) an employee to buy a specified number of shares of stock from a company for a specified price during a specified period of time. There are two categories of stock options.

  • Nonstatutory (nonqualified) stock options.
  • Statutory (qualified) stock options. Statutory stock options include incentive stock options (ISOs) and employee stock purchase plan options (ESPPs).

The employer determines the type of option offered to an employee.

The term “nonqualified stock option” is a technical term describing certain types of stock options granted to employees. The term refers to how the gain is taxed, not to the legitimacy of the transaction… READ MORE